Obtain all data necessary from the worksheet prepared for The Game Place in Problem 12.6B at the end of Chapter 12. Then follow the instructions to complete this problem.
INSTRUCTIONS
1. Prepare a classified income statement for the year ended December 31, 2013. The company does not classify its operating expenses as selling expenses and general and administrative expenses.
2. Prepare a statement of owner’s equity for the year ended December 31, 2013. No additional investments were made during the year.
3. Prepare a classified balance sheet as of December 31, 2013.
Analyze: What is the amount of working capital for The Game Place?
Problem 12.6B
The Game Place is a retail store that sells computer games, owned by Matt Huffman. On December 31, 2013, the firm’s general ledger contained the accounts and balances below. All account balances are normal.
Cash | 32,465 |
Accounts Receivable | 669 |
Prepaid Advertising | 480 |
Supplies | 425 |
Merchandise Inventory | 18,500 |
Store Equipment | 30,000 |
Accumulated Depreciation—Store Equipment | 3,000 |
Office Equipment | 4,800 |
Accumulated Depreciation—Office Equipment | 1,500 |
Notes Payable, due 2014 | 22,500 |
Accounts Payable | 3,725 |
Wages Payable |
|
Social Security Tax Payable |
|
Medicare Tax Payable |
|
Unearned Seminar Fees | 7,500 |
Interest Payable |
|
Matt Huffman, Capital | 43,000 |
Matt Huffman, Drawing | 18,000 |
Income Summary |
|
Sales | 162,660 |
Sales Discounts | 180 |
Seminar Fee Income |
|
Purchases | 92,500 |
Purchases Returns and Allowances | 770 |
Freight In | 275 |
Rent Expense | 26,400 |
Wages Expense | 18,000 |
Payroll Taxes Expense | 1,811 |
Depreciation Expense—Store Equipment |
|
Depreciation Expense—Office Equipment |
|
Advertising Expense |
|
Supplies Expense |
|
Interest Expense | 150 |
INSTRUCTIONS
1. Prepare the Trial Balance section of a 10-column worksheet. The worksheet covers the year ended December 31, 2013.
2. Enter the adjustments below in the Adjustments section of the worksheet. Identify each adjustment with the appropriate letter.
3. Complete the worksheet.
ADJUSTMENTS
a.–b. Merchandise inventory at December 31, 2013, was counted, and determined to be $20,000.
c. The amount recorded as prepaid advertising represents $480 paid on September 1, 2013, for six months of advertising.
d. The amount of supplies on hand at December 31 was $150.
e. Depreciation on store equipment was $4,500 for 2013.
f. Depreciation on office equipment was $1,500 for 2013.
g. Unearned Seminar Fees represents $7,500 received on November 1, 2013, for five seminars. At December 31, four of these seminars had been conducted.
h. Wages owed but not paid at December 31 were $800.
i. On December 31, 2013, the firm owed the employer’s social securtity tax ($49.60) and Medicare tax ($11.60).
j. The note payable bears interest at 8% per annum. One month interest is owed at December 31, 2013.
Analyze: How did the balance of merchandise inventory change during the year ended December 31, 2013?
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